Jerry Moore: Economic stimulus plan may create its own crisis

Wednesday

Feb 25, 2009 at 12:01 AMFeb 25, 2009 at 2:29 AM

There are eerie similarities between the financial industry folks who crippled the economy and public officials who are destroying the federal budget. Awestruck by the sight of dollar signs, both groups pushed the nation down a parth that is leading to disaster.

Jerry Moore

There are eerie similarities between the financial industry folks who crippled the economy and public officials who are destroying the federal budget.

Wall Street honchos, banking executives, mortgage brokers and bond-rating managers refused to acknowledge that the complicated financial packages they started promoting early this decade were a Ponzi scheme destined to fail. All they saw were increasing profits based on rising property values.

Once they got a taste of how much money they stood to make in the short run, they blocked out any notion that the housing-market bubble could burst. But a few years ago, housing prices hit their ceiling and started dropping. People who signed outrageous mortgages intending to “flip” their homes couldn’t sell them before they got hit with monster payments.

They began defaulting on loans, and this resulted in the subprime mortgage crisis. The rampant foreclosures eventually struck the financial services sector, and industry giants last year began going belly up with credit being frozen.

That’s one calamity driven by greed. Another began in the fall with the passage of the $750 billion bailout plan and continued last week with the signing of the $787 billion stimulus package.

Passage of the stimulus bill shows we haven’t learned the lessons of the 1930s. What’s dragging down our economy isn’t the fact that we don’t have enough smooth roads or the right number of school-construction projects going on. It’s a depressed housing market coupled with a credit crunch, and until we address those problems we won’t see much economic growth.

Yet legislators passed the largest spending bill we’ve ever had, despite its obvious flaws. They saw pet projects finally getting approved, and this will translate into more votes.

Individuals who crafted the bill were more concerned with expanding their political power than with improving the economy. And just like in the private sector, their greed could well result in another catastrophe.

Jerry Moore is a news editor with Suburban Life Publications and can be contacted at jmoore@mysuburbanlife.com. His blog, Suburban Shoutout, can be found at www.mysuburbanlife.com.